Savings, Investment, and Growth in Mexico : Five Years after the Crisis

Despite Mexico`s recent remarkable progress in adjusting its fiscal and external accounts and in restructuring its economy, the recovery of growth has remained elusive. This paper reviews some aspects of Mexico`s recent performance and suggests that systemic adjustment uncertainty, and policy conflicts between stabilization and real depreciation objectives, are among the factors that have contributed most to delaying the private sector`s investment response and preventing a sustainable recovery. The paper also assesses future growth prospects and resource mobilization needs, based on a growth model that fully incorporates the internal transfer problem and emphasizes solvency requirements